If a company has a healthy current ratio but a significantly lower quick ratio,then you can assume that:
A) the cost of goods sold represents more than half of sales.
B) current liabilities exceed current assets.
C) the firm sells only on a cash basis.
D) inventory represents a large portion of the firm's current assets.

Question

Quizplus · Accepted Answer

A healthy current ratio indicates that the company has enough current assets to cover its current liabilities. However, if the quick ratio is significantly lower, it means that a large portion of the current assets is tied up in inventory, which cannot be easily converted into cash. Therefore, option D is the best choice.

If a Company Has a Healthy Current Ratio but a Significantly